Voters punished the HDZ - Croatia's dominant party since independence in 1991 - for a string of corruption scandals and rising unemployment.

The Kukuriku ('cock-a-doodle-doo') bloc, led by 45-year-old former diplomat Zoran Milanovic of the Social Democrats (SDS), will have to act fast to trim state spending and avert a potential credit rating downgrade.

Milanovic has told Croats they will have to work "more, harder, longer" to turn the economy around before the country of 4.3 million people becomes the second ex-Yugoslav republic to join the EU in July 2013.

"I have a decent pension but I look around me and I see poverty everywhere," 74-year-old pensioner Milan Grgurek said after voting in the capital, Zagreb. "Whoever comes to power ... will have to carry out reforms."

Croatia broke away from Yugoslavia in a 1991-95 war, and has seen its economy boom over the past decade on the back of foreign borrowing and waves of tourism to its stunning Adriatic coastline.

But growth ground to a halt when the global financial crisis hit in 2009 and Croatia has been the slowest among central and south-east European countries to crawl back out of recession.

'Efficient' leadership

The conservatives led Croatia throughout its 1990s war for independence from the former Yugoslavia and have ruled ever since, except for the 2001-2003 period when the centre-left coalition took over.

But they have recently been mired in a string of corruption scandals, including alleged involvement in illegal fundraising for previous elections.

Ivo Sanader, a former prime minister, is also alleged to have pocketed millions in bribes to allow an Austrian bank and a Hungarian energy company into the Croatian market, allegations he denies.

Milanovic, who has steered clear of inflated election claims, as surveys show Croatians' confidence in politicians is extremely low, vowed to lead the country in a "more honest and efficient way".

Jadranka Kosor, the prime minister and current conservative leader, has been campaigning on a nationalistic platform that claims the left-wing coalition will push Croatia back to socialism.

Before the results were released, she said the chances of her party, the Croatian Democratic Union (HDZ), should not be underestimated. "HDZ is the strongest when it's tough," Kosor said.

"HDZ led the country during the most difficult times with historic results."